What can brokers expect for the next few years?

One of Canada’s largest banks has released an economic forecast, which includes an interest rate outlook that goes as far as 2019 – so when can brokers expect to see rate hikes?

TD Bank has released a forecast for interest rates that looks ahead as far as 2019.

The Bank of Canada overnight rate is expected to remain at 0.5% until 2017, when it is expected to rise to 1.25%. TD expects that rate to increase to 2% by the end of 2018 and to 3% in 2019.

The five year government bond yield, which lenders base their five-year fixed rates on, is expected to close out 2015 at 0.9% before increasing to 1.6% next year. That upward trajectory is expected to continue in the following years; rising to 2.35% in 2017, 2.85% in 2018, and 3.3% in 2019.

And the talk of increased rates – no matter how delayed – could encourage clients to jump into the market sooner than later.

It may also fall to brokers to encourage clients to choose a lower term now, in order to ensure they come up for renewal at a lower interest rate.

“With growth held back by the recession in the first half of the year, 2015 provides a weak starting point for the forecast,” TD economists James Marple and Brian DePratto said in the bank’s long-term economic forecast. “Growth recovers in 2016, and from 2017 onwards remains near its estimated ‘cruise speed’ around 1.8%.”

The bank also provided a forecast for the housing and oil industries.

“Even after recovering, oil prices are expected to settle in the $70 range, sufficient for solid if unremarkable investment growth,” the economists said. “At the same time, residential investment is expected to contract in 2017 and 2018, consistent with a rebalancing of the housing market.”

Well, a 2% to 3% increase in rates will do alot to hurt affordability. Will it happen ? We will have to see how the macro debt market prices their debt rates to raise money. Did anyone ask TD if it will rain this weekend ?